Emphasizing strong momentum in the “two strategic products that will determine our future,” Oracle Executive Chairman and CTO Larry Ellison said during Oracle’s first-quarter earnings call that the company is “well on its way” to becoming the world’s largest cloud application vendor and is poised to gain share in the cloud infrastructure segment “very, very rapidly.”
ERP (enterprise resource planning), which encompasses applications that manage financial, inventory, and other core business processes, is the largest segment of the enterprise application market. Oracle CEO Mark Hurd said in Oracle’s first-quarter earnings press release that the company has nearly 5,500 customers for its Fusion cloud ERP services and more than 15,000 for its Oracle NetSuite cloud ERP services.
Hurd said during the earnings call that some customers are buying Oracle’s cloud ERP products to replace their SAP on-premises ERP software or the cloud-based financial software of Workday, a relative newcomer to that segment.
Hurd cited a dozen or so cloud ERP customer wins in the first quarter, including Airbnb, Legg Mason (both are replacing Workday financials), FedEx (whose TNT unit in Europe is replacing its SAP ERP with Oracle Cloud ERP), Academy Sports, Federal Home Loan Mortgage, Highmark Health, Noble, Saudi Telecom, and the state of Nebraska. Several of Oracle’s new cloud ERP customers are also buying Oracle’s cloud-based human capital management (HCM) and/or supply chain management applications, Hurd noted.
“Once you win ERP financials, the opportunity to then gain HCM and supply chain management is significant,” he said.
The other strategic product that Ellison emphasized is the new Oracle Autonomous Database Cloud, with data warehouse and transaction-processing database offerings that are optimized to run on the company’s second-generation Oracle Cloud Infrastructure.
Oracle Database is already the world’s most popular and technically advanced database, Ellison said. And as an autonomous cloud service, Oracle Database is now self-managing and self-patching, so it not only performs substantially better than comparable Amazon Web Services products, he said, but it’s also more reliable, more secure, and much less expensive to operate.
As Oracle’s tens of thousands of database customers start migrating their workloads and shifting their licenses to Oracle Cloud, “we think these compelling advantages will allow us to compete very effectively against Amazon in the infrastructure business,” Ellison said. “Today, we may be behind Amazon in infrastructure market share, but we are way ahead of Amazon in cloud infrastructure technology. We think that will allow us to gain market share in infrastructure in the cloud very, very rapidly.”
The Broader Numbers
For its fiscal 2019 first quarter ended August 31, Oracle reported that its operating income rose 1% from the year-earlier quarter, to $2.8 billion, on 1% higher total revenue of $9.2 billion. Oracle’s cloud services and license support revenue rose 3% in the quarter, to $6.6 billion. (All of those are GAAP numbers.)
Drilling down into cloud product categories, Oracle CEO Safra Catz said that revenue for the company’s cloud ERP business grew in the 30%-plus range and that the cloud revenue of its vertical industry business units grew in the 40%-plus range (and is now larger than those units’ on-premises software license revenue). (Those percentages reflect non-GAAP numbers.)
Catz said Oracle’s operating cash flow during the last four quarters was a record $15.5 billion.
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